Why iPhone buyback offers are so low

In our inaugural post, we argued that there is an opportunity for Orchard to differentiate itself from existing smartphone selling solutions by providing simplicity in combination with a good return. In order to fully understand why this opportunity exists, it is instructive to dissect the business model behind carrier, retailer and web iPhone buyback programs – a group we refer to as the Liquidators (this group is surprisingly concentrated).

These firms offer sellers of used iPhones a convenient sale process in exchange for more than 35%of their device’s value. Despite the fact that the liquidators’ cut can be as high as $205 – see tables – people have proven willing to pay for the convenience: the liquidators represent a large (and increasing) share of the rapidly growing smartphone resale market.

So how does this model work? After the phone has been purchased, the phone is shipped to a warehouse, where staff assesses its condition and (when it makes sense to do so) touches up or repairs the phone. From there, phones are either sold on ebay, or sold to and shipped to distributors in the developing world.

That is a lengthy route from the seller to the buyer and all of the of expenses and profit margins that need to be paid along the way are funded by the difference between the lowball price offered to the seller, and the final price paid by the buyer.

Orchard’s model is fundamentally different. We help broker transactions: working to enable direct connections between sellers and buyers of used iPhones, and as such have a much leaner cost structure than that of the liquidators.

For our users, that means that Orchard is able to help you realize the full value of your device – as much as $205 more than the Liquidators are offering – while cutting out much of the work involved in a typical Craigslist and/or Kijiji transaction.